I’m a big fan of Michael Cook’s because as a money-wise investor, he’s posted some great stuff and contributed a lot to the education of folks like myself and others. In an article recently, he posed the question, “Does The Real Estate Industry Need Realtors?“.
As I’ve stated before, I have had a real estate license, worked in the industry, and got out because I was scared to death of all the incompetence. The 80/20 rule (or Pareto Principle) in a nutshell is that saying you’ve heard that 80% of the money made in real estate is by 20% of the people in it. However, having been in the trenches, it was frightening how careless so many agents I worked with were with their client’s futures. I know you have bills, but that should come secondary to prompt, polite, and jaw dropping service to your clients.
Now in the defense of realtors, there were a few who I tipped my hat to. There are still a few I have contact information for that I’d recommend in a heartbeat knowing that not a dime would come my way, but that they’d be taken care of regardless. However these guys and gals were far and few between.
To paraphrase, Cook, here are a few he looks for in his transactions:
First, as a consumer I want a realtor to relentlessly try to get me the best deal possible. If I am buying a property, I would like a realtor to help me get the lowest price and if I am selling I would like the opposite. In order to assess this, I need a realtor that knows the market beyond printing out a set of comparable transactions. I would like to know the best blocks to buy and why my house should be valued differently than the house next door.
Realtors fall all over the map in this area; however, on the buyer side they really don’t cut the mustard. To start, the commission structure favors the seller. Most realtors will tout their ethics, but on more than one occasion I have heard and seen realtors take a price that was clearly inappropriate for their client (too high and too low). Even if every realtor was perfectly ethical, consumers see this as an unnecessary temptation; they don’t see it as only several hundred dollars.
Second, realtors need to be consultants, ensuring I find as close to what I am looking for as possible. If this means a quick sales or the right neighborhood, realtors should have enough connections to get me where I want to be. Furthermore, they should be willing to tell me if they just can’t meet my needs. Again, this goes beyond putting my price range in the MLS and handing me a print out. Talk to me about how good the school districts have been in the past and where they look to be going in the future. Show me how many new families have moved in or connect me with some of your previous clients in the neighborhood.
The last thing I want to mention are the outside factors affecting realtors and their perceived usefulness. It seems like I have harped on the National Association of Realtors for a week now, but I am amazed that they get paid to destroy their members reputation. Instead of being paid to think of industry innovations, they use their members’ funds to fight a fruitless fight against the Department of Justice and other organizations, as well as spout data to undermine their integrity and that of their members. Perhaps I should start charging realtors half the price to bad mouth them, then maybe I could put the NAR out of business. Too many members spout the party line, which has not been consumer friendly for quite some time.
In closing, I would like to point out that I fall more on the realtors are unnecessary side in their current form. If most realtors provided half of the services listed here well, I would change my opinion in a heartbeat. The realtors on this site (link) (and many of those commenting) never cease to amaze me with their brilliance; unfortunately, they represent a minority of the industry.
It was the part in red that got my attention the most. In a room full of realtors, to take that stance will definitely require some further explanation.
But he’s completely right. Having been in the industry from Residential Real Estate, to New Home Construction, to Timeshare/Vacation Ownership, there are some terrible agents out there, only interested in their next commission check.
I’ve had a couple great real estate transactions and one bad one. Mine dealt with a new construction build I had purchased in which the agent saw me as nothing but a young guy with paycheck stubs to qualify him for his next check. It was the worst service I’d ever gotten.
But rather than harp on my experience, I wanted to get your opinions and stories. What were some of your wonderful or terrible experiences with realtors? Do you think they are still necessary in today’s market where we can find neighborhoods, prices, and comps online? How can realtors justify their existence to earn your money?
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